Lower 3.5pc rate to encourage first-time buyers
AIB has moved to slash homeloan rates for first-time buyers in a move to shake up the stagnant loan market.
The bank is offering new buyers a one-year fixed rate of 3.25pc -- the same rate as the European Central Bank.
The rate is around 2 percentage points better than those being offered to competitors.
Most lenders have moved a couple of times this year to increase the rates they charge new customers, while lenders have also failed to pass on the two recent ECB rate cuts to new buyers.
The bank said yesterday it would be losing money on the new mortgage product, but said it was attempting to stimulate the housing market for first-time buyers.
"We are attempting to say to new buyers, don't hold back," an AIB spokesman said.
AIB will lend up to 92pc of the value of the home, which is in contrast to a number of other banks and building societies which will now only give new buyers funding for 80pc of the value of the home.
After the one-year discount period is over those who take up the new deal will move to a standard variable rate of 4.5pc.
Karl Deeter of Irish Mortgage Brokers commented: "This new rate clearly represents massive value. It does not mean the market is fixed but it puts a very competitive rate out there."
Brokers said the next best rate available to new buyers were standard variable rates from Halifax at 4.9pc and Bank of Ireland at 5.25pc.
A number of lenders have stopped offering standard variable rates, in addition to withdrawing mortgages that track the ECB rate, known as trackers.
They now offer variable loan-to-value (LTV) mortgages, where the rate paid is linked to the amount borrowed compared with the value of the home. Some lenders offering variable LTV mortgages have not passed on all of the recent ECB cuts.
AIB said: "First Time Buyers are essential to the property market but may have been holding back until now. This offer . . . puts them in a position of strength and means that those who want to get on the property ladder now don't have to wait for future ECB rate cuts."
The rate will be available from next Wednesday.
- Charlie Weston Personal Finance Editor
